App-connected cars will drive new advertising opportunities

Future cars are set to bring a whole new meaning to the phrase “mobile apps.”

In the next five years, 20% of all cars in the United States and Western Europe will be able to access Internet apps, via either smartphone connections or their on-board computer systems, predicts Juniper Research. Retailers can capitalize on that trend by providing digital goods and services through a new medium, the car, and by helping drivers to find stores and check product availability while on the road, says Anthony Cox, author of the study. Additionally, advertisers will have a new way to target consumers based on their use of in-car apps, he says, which “becomes particularly powerful when combined with the knowledge of vehicle location.”

Cars can connect to apps either through smartphones docked to a vehicle, commonly via a USB port or a wireless Bluetooth link, or through their manufacturer-installed computer systems. In the latter case, cars could potentially download and access apps using Internet programs already available in some vehicles, such as OnStar LLC’s security and navigation service, Juniper says.

Cox predicts that more cars will integrate app connections directly into their computer systems, but they’ll likely also have attachments for smartphones, too. “As much of the content and existing apps will be on the smartphone, there will still be a role for smartphone tethering,” he says. “The extra cost of providing this functionality is pretty small relative to the cost of creating the integration in the first place.”

Widespread smartphone ownership combined with new technology standards for integrating apps into vehicles is accelerating the adoption of car-connected apps, Cox says. For example, global membership organization the Car Connectivity Consortium has developed MirrorLink, a standard set of Internet technologies that can be used on a wide range of devices. It allows a consumer to connect a smartphone to her car and then access apps on the phone through the same interface he uses to control the car’s radio, the consortium says. MirrorLink has built-in safety controls that approve only certain apps for use while driving. Other, similar technologies that connect smartphones to car “infotainment systems” are on the rise, Juniper says.

“Incorporating the smartphone into the vehicle has become, and will continue to be, a major driver for automotive infotainment and in-vehicle Internet access,” Cox writes in the report. “It also opens the door to new business models for content providers and app developers, including the possibility of creating advertising-based models for in-car content.”

For example, in-car advertising could work similarly to commercial or satellite radio advertising, by delivering local ads paid for on the basis of having a wide audience, Cox says. Some companies, including Harmon International’s Aha radio app, are already working to create that audience, he says. Aha allows consumers to create and organize personal, on-demand stations for streaming content—such as a live feed from National Public Radio or Twitter— in a phone app and access it through their cars’ dashboard systems when driving.

Juniper says 120 million app-connected vehicles will be on the road worldwide by 2017. More than three-quarters of those cars will be in North America, Latin America and Western Europe, it says.